The suit-limitations period in an ERISA-governed disability insurance plan was rendered inapplicable by the insurer’s failure to notify a disability benefits claimant of the date by which he must file suit on the denial of his claim for extended benefits, a federal appellate panel instructed. Reversing the Puerto Rico federal trial court’s grant of summary judgment favoring the insurer/plan administrator, the panel held that ERISA’s implementing regulations require that a plan administrator inform a claimant not only of his right to bring a civil action, but also of the plan-imposed time limit for doing so.

Underlying dispute. A financial analyst at a corporation claimed and received sick leave, short-term disability, and eventually long-term disability from work due to physical and mental ailments. He began receiving long-term disability payments under his employer’s plan, which was governed by ERISA. About 18 months later, however, he received a letter from the insurer/plan administrator informing him that although he currently was receiving long-term disability benefits, his benefits would expire in six months because the maximum duration period for his particular disability (i.e., depression) was 24 months.

The plan administrator explained that in order to continue receiving benefits beyond that period, the employee would have to submit additional documentation showing that his disability was not subject to the limitation for disabilities resulting from “mental or nervous disorder or disease.” The employee submitted various medical files and additional information, but the insurer/plan administrator denied his claim for an extension of benefits beyond the 24-month period. Proceeding pro se, the employee filed an administrative appeal of the decision but the appeal also was denied.

While both the initial notification of expiring benefits and the later denial-of-appeal letters informed the employee of his right to bring a civil action on his claim, neither of those letters included a time limit for filing suit or mentioned that the right to bring such a suit was subject to a limitations period. However, the plan document itself—which the employee had received some ten years earlier when he first began work at his company—contained a suit-limitations period specifying that no legal action could be filed more than three years after the proof of disability had been submitted.

The employee eventually did file suit against the insurer/plan administrator for improper denial of benefits, but the insurance company moved for summary judgment on the basis that the suit had been filed some 18 months too late under the terms of the plan. The trial court agreed, granting the insurer’s motion and dismissing the employee’s complaint as time-barred. The employee appealed the ruling, arguing that the trial court erred in dismissing his case because the plan administrator’s failure to provide notice of the time limit for filing suit in its final denial letter entitled him to equitable tolling of the limitations period.

Limitations period for filing suit. ERISA itself does not contain a statute of limitations for bringing a civil action and, where an employee benefit plan provides a shorter limitations period, that period governs as long as it is reasonable. In the instant case, the plan administrator had made no mention of the time limit in its final claim-denial letter; ergo, the issue at the heart of the appeal was the impact that the plan administrator’s defective notice had on the plan’s contractual limitations period.

In failing to provide notice of the limitations period for filing suit, the insurance company was not in substantial compliance with ERISA’s implementing regulations, thus rendering the plan’s limitations period altogether inapplicable. In relevant part, the applicable regulations require that a plan administrator provide “written or electronic notification of any adverse benefit determination” that includes a “description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action.”

Notification requirement. Based on the plain language of the aforementioned regulation, the correct interpretation was that a denial-of-benefits letter must include notice of the plan-imposed time limit for filing a civil action. That interpretation is in keeping with ERISA’s purpose of ensuring a fair opportunity for judicial review and with its overall purpose as a remedial statute. Claimants obviously are more likely to read information stated in the final denial letter, as opposed to included (or possibly buried) somewhere in the plan documents, particularly in the circumstance where plan documents were provided to a claimant many years before his or her claim for benefits was denied.

Prejudice. Thus, the plan administrator had a regulatory obligation to provide notice of the time limit for filing suit in its denial-of-benefits letter, and it failed to do so. Moreover, where a plan administrator fails to include the time limit for filing suit in its denial-of-benefits letter and it has not otherwise cured the defect by, for example, informing the claimant of the limitations period in a subsequent letter that still leaves the claimant sufficient time to file suit, the plan administrator can never be in substantial compliance with the ERISA regulations, and the violation is per se prejudicial to the claimant.

In addition, because the above determination resolved the question of whether the insured’s claim was time-barred, there was no need to discuss whether the limitations period otherwise would have been equitably tolled. As a consequence of the insurer’s failure to include the time limit for filing suit in its final denial letter, the limitations period in the case at bar was rendered inapplicable. Accordingly, the trial court’s decision was reversed and remanded.